Priebe, Paul v. Autobarn, Limited

In the
United States Court of Appeals
For the Seventh Circuit
No. 00-2497
Paul Priebe,
Plaintiff-Appellant,
v.
Autobarn, Limited,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 97 C 3689--James B. Moran, Judge.
Argued December 6, 2000--Decided February 14, 2001
Before Bauer, Posner, and Williams, Circuit Judges.
Bauer, Circuit Judge. Paul Priebe ("Priebe)
bought a 1988 Acura from The Autobarn, Limited
("Autobarn"). While Autobarn offered no warranty,
it told Priebe that the car had been inspected
and had not been involved in any prior accidents.
Through Autobarn, Priebe bought a service plan
administered by Automobile Protection Corporation
("APCO"), an unaffiliated company. Roughly a
month later, Priebe crashed the Acura and claimed
that it had previous damage which made it
dangerous to drive. Priebe sued Autobarn under
both state and federal law, centering his claims
around statutory and common law violations of
warranty and commission of fraud. The district
court granted summary judgment in favor of
Autobarn as to all claims. We affirm the district
court’s decision.
I. Background
On November 11, 1995, Priebe traded his 1993
Jeep Wrangler worth $12,595 to Autobarn for a
1988 Acura Legend worth $8,185 plus the excess of
the Jeep’s value. Priebe wanted a car of lesser
value to drive in the city of Chicago. Before
purchasing the Acura, Priebe test-drove the
vehicle and determined that it drove well.
Priebe reviewed the sales contract before he
bought the vehicle. He was generally familiar
with contracts because he worked as a portfolio
manager in Citibank’s consumer lending division
reviewing contracts. Priebe read the disclaimer
of warranties, the conditions of sale and the
Federal Used Car Buyers’ Guide, all of which
informed Priebe that Autobarn did not offer a
warranty on the Acura. Priebe admits that he knew
Autobarn sold him the car "as is--in the as is
condition with no special warranties attached
from the dealership."
The same day Priebe purchased the Acura, he
entered into an Easy Care Vehicle Service
Contract ("Easy Care Service Contract" or
"service contract"). The service contract was
offered and administered by APCO, and sold
through Autobarn. Priebe knew that Autobarn bore
no responsibility under the service contract. He
discussed the service contract coverage and
signed a statement to that effect. Priebe knew
that the Easy Care Service Contract did not cover
previous damage to the Acura. Autobarn was to
deduct the service contract fee from the amount
it owed Priebe on the Jeep, however, due to an
oversight, Autobarn neglected to do so.
Roughly one month after he purchased the Acura,
Priebe crashed the car. Priebe had the car towed
to Gerber Auto Rebuilders ("Gerber") for repairs.
Several days into the repairs, Gerber called
Priebe claiming to have found damage to the Acura
caused by an accident previous to Priebe’s.
Priebe believed that this damage made the car
dangerous to drive. As Priebe admitted in his
deposition, he could not prove that Autobarn knew
about the prior damage. Gerber repaired all the
damage to the car and Priebe’s auto insurer
Allstate paid the entire bill, minus the $500
deductible.
After the accident, Priebe attempted to revoke
the sales contract and cancelled the service
contract for which he had not been charged.
Priebe continued to drive the Acura. At the time
of trial in October 1998, he had driven the Acura
in excess of 30,000 miles.
Priebe sued Autobarn claiming that: (1) Autobarn
breached the Easy Care Service Contract which
also violated the Magnuson-Moss Act; (2) Autobarn
breached an implied warranty under 810 ILCS 5/2-
314 which also violated the Magnuson-Moss Act;
(3) Priebe validly revoked acceptance; (4)
Autobarn violated the Illinois Consumer Fraud and
Deceptive Business Practices Act; (5) Autobarn
committed common law fraud; and (6) Autobarn
violated the federal odometer statute. The
district court granted Autobarn’s motion for
summary judgment as to all counts. Priebe then
sought relief under Fed. R. Civ. P. 59(e), which
the court refused to grant. Priebe now appeals
all claims except the federal odometer cause of
action, arguing that the district court granted
summary judgment in error because genuine issues
of material fact exist as to the remaining five
claims.
II. Discussion
Despite the absence of the federal odometer
claim, which, if frivolous, would not have
supported federal jurisdiction, Priebe’s claims
create federal jurisdiction. Priebe’s breach of
contract and breach of warranty claims meet the
Magnuson-Moss Act’s requirements for federal
jurisdiction. Priebe’s other claims qualify for
supplemental jurisdiction under 28 U.S.C. sec.
1367. We have the authority to hear this case
under 28 U.S.C. sec. 1291. We review the district
court’s grant of summary judgment de novo and
construe all facts in favor of Priebe. See Oto v.
Metropolitan Life Ins. Co., 224 F.3d 601, 603
(7th Cir. 2000).
A. Breach of Contract Claim
Priebe argues that Autobarn breached the Easy
Care Service Contract because the sales person
failed to disclose that the Acura had been in a
prior accident and knew that the Easy Care
Service Contract would not cover the existing
damage. Under Illinois law, "[t]o state a cause
of action for breach of contract a plaintiff must
show: (1) the existence of a valid and
enforceable contract; (2) the performance of the
contract by plaintiff; (3) the breach of the
contract by defendant; and (4) a resulting injury
to plaintiff." Hickox v. Bell, 195 Ill. App. 3d
976, 992, 552 N.E.2d 1133, 1143 (5th Dist. 1990)
(citations omitted).
Priebe’s argument does not constitute a breach
of contract claim. Initially, it is unclear under
what theory Priebe believes Autobarn is a party
to the Easy Care Service Contract. Pushing this
concern aside, we rest our decision on the breach
element. Priebe never invoked the Easy Care
Service Contract. He never submitted any claim
for the Acura to APCO; rather he sent it to
Allstate. Priebe cancelled the Easy Care Service
Contract and despite evidence that Priebe did not
pay for the contract, he received a pro-rated
refund. Given these facts, Priebe fails to prove
that Autobarn breached the service agreement.
Priebe’s Magnuson-Moss Act claim also fails. The
portion of the Act under which Priebe sues does
not provide an independent basis for liability;
it only provides for federal jurisdiction for
some state claims, including this breach of
contract claim. See 15 U.S.C. sec. 2310(d); see,
e.g., Gardynski-Leschuck v. Ford Motor Co., 142
F.3d 955, 956 (7th Cir. 1998). Because Priebe’s
underlying breach of contract claim fails, his
Magnuson-Moss Act claim cannot succeed.
B. Breach of Implied Warranty Claim
Priebe next claims that Autobarn breached the
warranty of merchantability implied by Illinois
law on the Acura. See 810 ILCS 5/2-314. In
response to Autobarn’s argument that it validly
disclaimed the warranty, Priebe counters that the
Act prevented Autobarn from making a valid
disclaimer. Due to Priebe’s admission that
Autobarn sold the car "as is," the disclaimer
stands unless it is disallowed by the Act. The
Act prohibits a supplier from disclaiming an
implied warranty regarding a consumer product
when "at the time of sale, or within 90 days
thereafter, such supplier enters into a service
contract with the consumer which applies to such
consumer product." 15 U.S.C. sec. 2308(a). The
Act defines a service contract as "a contract in
writing to perform . . . services relating to the
maintenance or repair (or both) of a consumer
product." 15 U.S.C. sec. 2301(8).
As the district court correctly reasoned, the
service contract cannot be construed as creating
a warranty of merchantability because the service
contract bound APCO, not Autobarn, to repair the
Acura. Priebe has not articulated how Autobarn is
a party to the contract. Therefore, we conclude
that the service contract with APCO is not
sufficient to prevent Autobarn from disclaiming
implied warranties.
Further, the district court is correct that
even if the implied warranty of merchantability
was in force, Autobarn did not breach it. The
Acura was fit to serve the purpose for which
Priebe bought it. Although Priebe maintains that
he "lost faith" in the Acura and believed it was
"dangerous to drive," his actions belie these
vague claims. Priebe continued to drive the car;
indeed, at the time of trial, Priebe had driven
the Acura more than 30,000 miles. Priebe’s claim
for breach of warranty fails.
C. Revocation of Acceptance
Next, Priebe claims that he validly revoked his
acceptance of the Acura. To be entitled to revoke
acceptance, the plaintiff must prove that: (1)
there was a breach of an implied warranty of
merchantibility; (2) the defect in the product
substantially impaired the product’s value to
him; (3) the plaintiff reasonably thought the
defect could be cured; and (4) it has not been
cured. See Collum v. Fred Tuch Buick, 6 Ill. App.
3d 317, 321, 285 N.E.2d 532, 535 (1st Dist.
1972).
For the reasons stated above, Priebe fails to
create a material issue of fact as to whether
Autobarn breached a warranty. Priebe protests
that breach of a warranty of merchantability is
not a necessary element in valid revocation of
acceptance, and claims that he may revoke his
acceptance if the "nonconformity of the goods
substantially impairs their value to the buyer."
Blankenship v. Northtown Ford, Inc., 95 Ill. App.
3d 303, 306, 420 N.E.2d 167, 170 (4th Dist.
1981). Priebe, however did not create a material
issue of fact as to whether the value of the
Acura was substantially impaired. Priebe argues
that the Acura was in a pre-purchase crash that
made it dangerous to drive and that he lost faith
in the car. Accepting these facts as true does
not prove substantial impairment of value. Priebe
had the damage fixed under his insurance policy
and continued to drive the car. Given Priebe’s
subsequent use of the Acura, he cannot claim that
its value was substantially impaired.
D. Illinois Consumer Fraud and Deceptive Business
Practices Act Claim
Priebe contends that Autobarn violated the
Illinois Consumer Fraud and Deceptive Business
Practices Act ("ICFA"), 815 ILCS 505/1 et seq.,
because it misrepresented the Acura’s prior crash
history and the mileage on the vehicle at the
time of sale, and failed to disclose that the
Easy Care Service Contract would not cover pre-
existing damage. We address only Priebe’s first
theory as the others are without merit. To state
a claim, Priebe must show that: (1) Autobarn
engaged in a deceptive practice; (2) Autobarn
intended Priebe to rely on the deception; and (3)
the deception took place in the course of
conducting trade or commerce. See Zekman v.
Direct American Marketers, Inc., 182 Ill.2d. 359,
373, 695 N.E.2d 853, 860 (Ill. 1998). When a
private party brings an ICFA claim, it must
additionally prove that the defendant’s deception
resulted in damages. See 815 ILCS 505/10a(a)
("Any person who suffers actual damages as a
result of a violation of this Act committed by
any other person may bring an action against such
person."); Dwyer v. American Express Co., 273
Ill. App. 3d 742, 750, 652 N.E.2d 1351, 1357 (1st
Dist. 1995); Duran v. Leslie Oldsmobile, Inc.,
229 Ill. App. 3d 1032, 1039-40, 594 N.E.2d 1355,
1361-62 (2d Dist. 1992).
The district court reasoned that Priebe’s ICFA
claim failed because Autobarn did not knowingly
fail to inform Priebe that the vehicle had been
in a prior accident. Priebe protests that the
district court’s rationale is flawed, and we
agree. In reaching its conclusion, the district
court erroneously applied an exception to the
ICFA created by the Illinois legislature
exclusively for sellers of real estate. See 815
ILCS 505/10b(4); Totz v. Continental DuPage
Acura, 236 Ill. App. 3d 891, 902, 602 N.E.2d
1374, 1381 (2d Dist. 1992) ("section 10(b) [of
the ICFA] mentions certain exceptions to the
applicability of the Act but does not exempt used
car dealers from any of the Act’s
requirements."). In most cases under the ICFA,
including this one, the seller’s knowledge or
ignorance about the falsity of its
representations is irrelevant. See Breckenridge
v. Cambridge Homes, Inc., 246 Ill. App. 3d 810,
823, 616 N.E.2d 615, 623 (2d Dist. 1993).
Priebe has failed to show a material issue of
fact as to damages. The ICFA creates both public
and private claims. To state a private cause of
action, the plaintiff must show that the
defendant’s deception has caused his damages. See
815 ILCS 505/10a(a) (1999); Duran, 229 Ill. App.
3d at 1039-40, 594 N.E.2d at 1361-62 (2d Dist.
1992) (stating that damages are a required
element of a private claim and distinguishing
Greenburg v. United Airlines, 206 Ill. App. 3d
40, 45-46, 563 N.E.2d 1031, 1036 (1st Dist.
1990), which held that damages are not an element
of a public claim). Illinois courts have found
that private parties failed to state an ICFA
claim when they failed to show that they suffered
damages, see Dwyer, 273 Ill. App. 3d at 750, 652
N.E.2d at 1357 (finding that plaintiffs failed to
state a claim under the ICFA when they failed to
allege how they were damaged by defendant’s
practice of selling customers’ addresses to other
companies), or failed to prove that the
defendant’s deception caused their damages, see
Duran, 229 Ill. App. 3d at 1039-40, 594 N.E.2d at
1361-62 (finding that plaintiff failed to state
an ICFA claim when the damages did not stem from
the deception proved).
Priebe does not address the issue of damages in
his brief. In his amended complaint, Priebe’s
mention of damages is exceedingly vague and
cursory. He claims: (1) "damages" consisting of
cost of cover, insurance fees, loss of use,
amounts paid, cancellation of the installment
contract and incidental and consequential damages
with no estimates of the value of each; (2)
"punitive damages"; and (3) costs and attorney’s
fees. Nowhere does he explain how Autobarn’s
deception resulted in these undefined damages. We
cannot infer Autobarn’s fault as these damages
could have been caused by Priebe’s accident.
Further, the facts of the case belie the idea
that Priebe suffered any damage. Priebe’s
insurance covered the cost of repairing the prior
accident damage and the car was restored such
that Priebe continued to drive it. In the absence
of proof of damages and an explanation connecting
Autobarn’s deception to Priebe’s undefined
losses, we hold that Autobarn is entitled to
summary judgment on the ICFA claim.
E. Common Law Fraud Claim
To support his claim for common law fraud, in
contrast to an ICFA claim, Priebe must produce
some evidence that Autobarn knew it lied to
Priebe when it represented that the Acura had
never been in an accident. See Cramer v. Ins.
Exchange Agency, 174 Ill. 2d 513, 529, 675 N.E.2d
897, 905 (Ill. 1996) (citation omitted). As the
district court found, Priebe has failed to bring
any evidence showing that Autobarn knew that the
Acura had been in a prior accident. The prior
damage to the car was structural. Indeed, it was
necessary to dismantle the car to discover the
prior damage. At best, Priebe has shown that
Autobarn performed an extensive 64-point
mechanical check of the car. We cannot infer from
this evidence that Autobarn knew of the prior
accident. The district court rightly granted
summary judgment in favor of Autobarn on this
common law fraud claim.
III. Conclusion
We AFFIRM the decision below.